Asian stocks rose modestly on Wednesday, as investors remained cautiously optimistic of the Fed's next move. With the G20 conference pledging efforts to revive growth and employment, investors look forward to a concerted global action plan to ward off the risk of contagion from the ongoing European debt crisis.
Despite the Greek election resulting in a positive outcome, investors still believe that there is a need for some action by major central banks to restore investor confidence rattled by Spanish debt worries and considerable uncertainty about growth in Europe, the U.S. and China.
Commodities such as copper and crude were down about half a percent each and the euro was trading a tad lower against the dollar ahead of the Fed meeting tonight. The Fed is widely expected to extend its bond-buying program called 'Operation Twist' but there is no consensus on whether the Fed will unveil any new steps to rejuvenate the U.S. economy.
Tokyo stocks rose sharply, tracking an overnight rally in the U.S. and Europe on Fed stimulus hopes. The Nikkei average rose 1.11 percent to 8,752.31, its highest level since May 17, while the broader Topix index ended 1.7 percent higher at 747.34. With bests on further Fed easing increasing, Japanese trade data announced before the opening bell evoked a muted response.
Japan posted a merchandise trade deficit of 907.25 billion yen in May, the Ministry of Finance said today- slipping into the red for the seventh time in eight months. The headline figure was well shy of forecasts for a deficit of 583.0 billion yen following the downwardly revised 522.0 billion yen shortfall in April.
Financial shares such as Mitsubishi UFJ Financial Group, Nomura Holdings and Daiwa Securities climbed 3-5 percent, offsetting selling in export-linked shares like Fanuc and Sharp. Mitsui Fudosan paced the gainers among real estate shares, climbing 3.7 percent on policy easing hopes.
Nippon Steel rallied 2.9 percent on a Nikkei report that it aims to save Y100 billion in costs this fiscal year. Mitsubishi Heavy Industries tumbled 3.1 percent after U.S. regulators blamed faulty computer modeling by the company for a radioactive leak at a California nuclear power plant.
China's Shanghai Composite index ended down 0.3 percent, dragged down by property developers despite reports that a group of senior Chinese advisers have called on the government to relax property market restrictions to keep the economy growing. Trading volumes remained thin as investors braced for the long holiday weekend. The market will be closed on Friday to celebrate the Dragon Boat Festival, a long standing tradition in the country.
Hong Kong's Hang Seng index closed half a percent higher at a more than one-month high, mirroring firm regional cues.
Australian shares rose on Fed stimulus hopes, although bullish sentiment waned somewhat going into the close. A private sector survey predicting weaker economic activity in the second half of this year also resulted in stocks coming off their day's highs.
The Westpac-Melbourne Institute leading index, which indicates the likely pace of economic activity three to nine months into the future, stood at 0.2 percent in April, well below its long term trend of 2.6 percent. Both the benchmark S&P/ASX 200 and the broader All Ordinaries index gained about 0.2 percent each.
Banks led the gainers, with Commonwealth, Westpac and NAB rising 1-2 percent. In the mining sector, Rio Tinto rose 1.7 percent as it committed $4.2 billion to expand its mines in Australia's Pilbara and the Simandou operation in Guinea. Rival BHP Billiton edged up 0.3 percent, while gold miner Newcrest fell 1.5 percent.
Shares of Consolidated Media soared 9.7 percent after receiving a conditional and non-binding proposal from News Limited to acquire the company. Fairfax Media ended 0.8 percent lower in the wake of its restructuring moves.
South Korea's Kospi average ended 0.7 percent higher in thin trading, with hopes that the Fed will announce additional stimulus measures underpinning sentiment. SK Hynix closed up nearly 4 percent after the computer chipmaker announced an agreement to acquire Link_A_Media Devices Corp., a U.S. maker of memory-chip controllers, for $248 million. Shares of LG Display jumped 3.6 percent after announcing the launch of its Optimus L5 smartphone in Europe later this month.
New Zealand shares lost ground, with the benchmark NZX-50 declining a percent, as heavyweight Telecom suffered a huge loss after gaining 1.8 percent yesterday on the news of establishment of a further NZ$400 million credit line with Westpac. Shares of the nation's biggest listed company fell 2.2 percent, while medical device manufacturer and exporter Fisher & Paykel Healthcare slumped 6.2 percent on going ex-dividend.
Among other prominent decliners, whiteware manufacturer Fisher & Paykel Appliances, retailers such as Hallenstein Glasson and Michael Hill, insurer Tower and rural services firm PGG Wrightson fell 2-3 percent.
Elsewhere, India's benchmark Sensex was last trading up 0.4 percent, Indonesia's Jakarta Composite index rallied 1.6 percent, Malaysia's KLSE Composite gained 0.6 percent, Singapore's Straits Times index was up half a percent and the Taiwan Weighted average added 0.9 percent.
On Wall Street, stocks posted solid gains overnight on continued speculation about the likelihood of further Fed stimulus. Some encouraging U.S. data concerning permits to build new homes and news that Spain has achieved its target at a bond sale auction, albeit at high costs, also supported risk sentiment. The Dow rose 0.8 percent, the tech-heavy Nasdaq gained 1.2 percent and the S&P 500 added a percent.
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